Wal-Mart’s tethering concept goes live May 2

ORLANDO, Fla. — Wal-Mart Stores Inc. will launch its “tethering” concept in early May. The initiative will allow the company to deliver products to its brick and mortar stores through on-line ordering.

“So if you are on your way home today from wherever you are, and you know you need to stop for gas, you can place your grocery order to be picked up when you get your gas,” said Bill Simon, president and chief executive officer of Wal-Mart Stores, Inc. “And if you want a shovel to shovel your way out of the driveway when you get home, because it’s not this warm everywhere in the country, you can also order that and it will be available for you.

“We can do that — by May we will have one market up; later in the year we will have two other markets up. And that’s a very, very exciting proposition for us.”

Simon made his comments during the Raymond James Financial Inc. Institutional Investors Conference on March 4.

He added that through the company’s tethering approach its small store formats, Neighborhood Markets and Wal-Mart Express, will have the stock-keeping-units of a supercenter.

He described tethering as “full connectivity,” which means the company’s distribution system will be fully connected from a supply chain perspective as well as a store associate, labor and store assignment perspective.

“It is the digital thinking of physical retail,” Simon said. “So in digital, somebody orders something on-line, you find out where it is and you figure out how to get it to them the quickest way, the most effective way.”
But the concept is not without challenges.

“From a distribution perspective, the small stores — you don’t want to bring everything to it on a 53-foot trailer,” Simon said. “That last 10 miles for one pallet or two pallets would be very expensive.

“Yet on the fresh side, for example, we have enough to be able to send a truck there. So, hypothetically, the algorithm could tell you that we will send pallets in 53-foot trailers for the fresh product, but for the dry product we will cross-dock it from a supercenter. And for the slow-moving items, we could ship it from the Walmart.com DC to the small store to be stocked on a shelf.”

Customer satisfaction with the new effort has been very good, Simon said.

“We’re not charging more for service,” he said. “On the delivery side we do have very low delivery costs, no subscription on the delivery side. And on the pickup there is no cost, so Wal-Mart prices with the convenience of on-line. And that is really what we’re trying to deliver and we are well on our way to that.”
The tethering model is an extension of the company’s test in Denver, and Mr. Simon said the company will roll it out quickly as demand develops.

“In Denver we went and put pick-up locations into existing supercenters, sort of kind of a module,” he said. “We’re going to try at some point the pick-up module without a supercenter, just a drive-through like a — I don’t know, kind of like a Sonic. And we are going to try that pickup at a very small store in this tethering model in the Expresses.

“So we’re going to create a depot; we’re going to attach it to a supercenter, testing all of those and then some of them will work in certain locations and we will go fast there. Some of them will work in other locations. We’re looking at it as a bit of a modular play.”